Gambling through the ages – Part 1

In this series of articles, Jonathan Barker looks at how change is inevitable in the gambling industry, and how some stakeholders will thrive in it, while others shrivel up and die.

The Racecourse Bookmaker

With all the fuss about gaming and casinos eating into the market share of bookmakers and race wagering, anyone would be inclined to think that change is something restricted to only the modern generation. Some folks have short memories…

Horse racing was the first form of organised gambling in Australia, and most countries for that matter, with bookmakers the original platform for a punt. With racing being a social gathering, the only place to gamble legally and having little competition for entertainment, crowds were strong and rows of bookmakers competed for punters’ hard-earned cash. Governments and race clubs soon were putting their hand out for bigger returns and the first pari-mutuel system, also known as a totalisator, was born.

With legal betting being restricted to on-course activity only, an illegal market sprang up, namely the SP bookmaker, particularly from the 1930s once radio broadcast and telephone technology became more accessible to the general public. Every local pub seemed to have one and as was the culture of the day, police were more inclined to have the odd bet themselves than shut them down. Bookmaking was generally a licence to print money – information for punters was thin, form guides were primitive and sophisticated ratings systems were years away.

Wars came and went, superstar thoroughbreds such as Phar Lap and Rising Fast kept racing in the public eye and constantly in the papers. As the population grew, cities spread further and further away from racetracks, which meant the poor punter living on the wrong side of town had to trek for hours just to legally put on a bet on… or he could just pop down the pub and do business with his local SP.

Governments decided the best way to make money out of betting and reduce the impact of SP operators was to legalise it off-course. The TAB agency was born and introduced throughout Australia in the 1960s. The nails in the coffin for racetrack bookmakers had started with the black-market bagmen, but little did they know just how big the enemy could become.

Technology took its time to catch up with the new suburban phenomenon, punters having to place bets no later than thirty minutes before the race, and collect the next day. That may sound archaic to punters of the internet era but without any computer, let alone an Oracle database, someone had to work the abacus to calculate the dividends!

As technology improved, agencies spread far and wide allowing punters to bet into rapidly-growing pools. Radio broadcasts were easily accessible as commercial stations competed against each other covering racing, broadcasting into the lounge rooms of punters across Australia. Competition for the racing punters’ dollar was growing and more importantly, the recreational punter started to go to the track less and less. The more serious players such as the Computer Group syndicate had a major impact on markets, and with less mug money to balance out the pros, the number of bookmakers found at the track was on the decline.

Television got heavily into sport in the late 70s with the Melbourne Cup being screened live for the first time on Channel Ten. Harness racing from Harold Park was shown every Friday night on the ABC. Even the Perth summer carnival was broadcast into the Eastern States on the Seven network as racing on TV entered its halcyon days.

As the sport of kings became popular on TV, other sports were doing just as well. Kerry Packer revolutionised sport with World Series Cricket, the VFL and ARL were drawing strong viewing figures on weekends and suddenly racing had intense competition in the media. Attendances at the track faded further, never to return to the same weekly levels.

Adelaide and Perth decided to join the NT and Tasmania on the casino trail during the 80s, and local racing turnover figures took a major hit. The boom times of the WA racing industry in the 70s and 80s when Colin Hayes and Tommy Smith brought teams across for the riches on offer are long gone. Alan Bond and Laurie Connell went broke, the big gamblers fancied a change to blackjack and baccarat, and a few highly-publicised scandals relating to race-fixing and performance-enhancing drugs sent the WA racing industry into a tailspin.

Bookmakers took the major hit again. As punters went elsewhere, the cash stopped flowing through the ring. Scores of bookies either went bust or simply gave up. Some changed their style into ‘turf accountants’, cutting back their risk in the realisation that the crowds and the mug money were dropping like flies. The number of high-rolling bagmen prepared to take everyone on was drying up – the colour, the personalities, the thrill of being at the track - it was all fading away.

Shops had started to open on Saturdays and then Sundays – to the younger generation, racing was a pastime for their father or grandfather and the next wave of punters was not interested at all. Live footy on TV on a Saturday afternoon, better facilities at other venues, or charging people for the right to attend a racecourse and lose money – which would you choose if you were only a fair-weather racing fan?

The corporate world began to evolve into more efficient businesses. With racing interest dropping away, television coverage followed suit. Replays of the daily double on the evening news were few and far between, interrupting the cricket to show four races from Randwick disappeared. My country town used to broadcast the local cup carnival live with replays in the evening – that is long gone.

Networks changed tack with the racing industry, only wanting to cover a select few events and demanding money to cover meetings outside carnival time. Kerry Packer had created Sky Channel and then sold it off to the newly-privatised NSW TAB (TAB Ltd). TAB Ltd then moved to seize control of all race broadcasting, with new contracts becoming exclusive so they could charge more for advertising.

The off-course monopoly for TABs took another step as agencies moved into pubs to avoid the smoking in the workplace bans. The added bonus of pub business was the later opening hours, enabling punters to maximise turnover by throwing away beer money on evening dogs and trots as well.

Bookies effectively conceded to the TABs by converting their odds to a decimal format – an admission that they had done little in recent decades to educate punters about the advantages of fixed-odds betting and being trackside. The younger recreational punter, an endangered species on a racetrack outside of carnival time, had grown up learning TAB odds as bookmakers had tried to protect their patch in vain by restricting the distribution of their prices away from the track. The irony is that the totes do remarkably little to educate the punter either.

With the TABs effectively controlling racing and each state government’s Department of Racing via their tax revenue, bookmakers were represented less than ever before when decisions were made. The bagmen managed to get a reduction in their turnover tax rate in some states, but in reality, paying tax on ever-diminishing holds no longer made sense – any other business pays tax on profits, and shrinking turnover does not guarantee paying staff wages, let alone making profits.

Underestimating the effect of legalised wagering off-course and a lack of unity within the ranks hadn’t done bookies any favours at all. With bookmakers being regulated by their own state, having a national and united front is nigh on impossible. The satchel swingers themselves certainly haven’t helped each other – rorting colleagues at other venues or interstate by manipulating prices is not uncommon.

Having little variation in product, being restricted in when and where they could field, old boys clubs restricting the number of bookmakers at certain events and how long a new bookmaker had to serve in the bush before joining the big league – any other industry would be taken to court within days as restraint of trade. The role of the corporate bookmaker in the wagering mix will be examined later in this series.

The Bookie IP project in Victoria promises plenty for bookmakers, but in the hands of Racing Victoria and government regulation, the betting is very short that they will strangle its potential success by over-interference and outdated restrictions.

Such a landmark project (a betting exchange where only bookmakers can lay, and punters see just one price) should not be restricted to just on-course bookmakers for that day – any person holding a licence within Victoria should be able to get involved, whether at the track or in their lounge room, and then it should be expanded to include bookmakers from other states. To restrict it to just those on-course will effectively maintain the status quo of price collaboration on small meetings.

Like any industry, gambling changes significantly with each generation. While states are allowed to restrict the business of bookmakers and regulate them differently to others who live just the other side of an invisible line within the same country, there will be little respite for them. Only the strongest and most adaptable will survive. Any bookmaker who thinks he can carry on like he did twenty years ago will go home with his tail between his legs very quickly.

My next article will examine the plight of the punter over a similar timeframe.

© 2006 Jonathan Barker